Emboldened by low interest rates, rising rent prices and a stronger sense of job security, more people are making the leap into home ownership. But as they do, many face fierce competition, limited choices and the pressure to act quickly.
The biggest challenge for many would-be buyers is that there are not enough homes on the market. In some areas with low inventory, homes are being snatched up within a matter of days. Thatâ€™s despite the rise in home prices, which increased by 4.9 percent in April from the year before, according to the most recent data from the Standard & Poorâ€™s/Case-Shiller 20-city home price index. â€śGood for homeowners, not good for potential buyers,â€ť says Lawrence Yun, chief economist for the National Association of Realtors.
In short, itâ€™s getting harder to find a good deal.
More homes are being built, but the pace is still not strong enough to meet demand, analysts say. Construction started on 685,000 single-family homes in June, up 14.7 percent from a year earlier but still close to 40 percent less than what was typical in 2007, according to a report released Friday by the U.S. Department of Commerce.
So what should home buyers do in such a tight market? Here are a few steps peopleshould take to increase their chances of landing the winning bid â€” and to protect themselvesfrom paying more than theyshould.
Before you do anything, get a pre-approval letter. You only need to get one. The pre-approval shows the seller that you have been vetted financially. It also gives you an idea of how much of a mortgage you can afford so that you can limit your search to houses within your price range.
In some markets, you may not get to see a house more than once or twice before you move in, so a pre-approval letter also can help you act quickly when you see a home you love. Keep in mind, however, that a pre-approval letter is not a guarantee for a mortgage, brokers say. So be ready to check with other lenders.
Make sure your broker knows the competition. Knowing how many people are interested in the house can help you come in with an offer that will be taken seriously, says Brian Block, a realtor in northern Virginia. Your broker might be able to find out from the listing agent how many people came to the open house and if it is likely to receive multiple offers, he says. Something that is too below the asking price or that doesnâ€™t match with the sellerâ€™s timeline might get rejected. â€śThat in turn will inform me as to how aggressive we have to be,â€ť he says. It also lets buyers know if they should prepare for a bidding war.
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